Archive for 2013

“Ted and Tanya moved back to Canada from Britain in 2005 and invested their savings in the stock market “just before the collapse,” Tanya writes in an e-mail. “Unfortunately, we have lost about $350,000 in our investments since then,” she adds. Tanya is 63 and a self-employed consultant. Ted is 61 and retired from his university job because of ill health. Their income and assets are substantial, but they wonder whether they are enough to generate their after-tax retirement income goal of $100,000 a year. Roughly half of their $2.2-million in assets is in personal-use real estate, including their Vancouver condo. When it comes to investing, Ted and Tanya consider themselves knowledgeable to a degree, but “we find the choices bewildering and the financial environment a confusing and risky hall of mirrors,” Tanya writes. They have a fair amount of cash and cash equivalents, and are uncertain where to deploy the money. “We would like to earn a steady income that would enable Tanya to retire in two or three years,” Ted says. “We also would like to see our capital preserved in the process.” First on their to-do list when Tanya stops working is to travel. “We are keen to bring coherence to our financial circumstances so that we can understand and manage our financial resources,” they write. We asked Ian Black, a fee-only financial adviser and portfolio manager at Macdonald Shymko & Co. Ltd. in Vancouver, to look at Tanya and Ted’s situation.” Click here to read the rest of the article

As you may have heard in the media, Professor Eugene Fama was awarded the Nobel Prize in Economic Sciences, along with Lars Peter Hansen and Robert J. Shiller. Professor Fama’s research on efficient market hypothesis was the impetus for the founding of Dimensional Fund Advisors, which MSC utilizes in our clients’ portfolios. Professor Fama currently serves as a director and consultant for DFA. We have a strong relationship with DFA and are honoured to be associated with the most recent Nobel Laureate and whom we have heard him speak numerous times at many of our educational sessions.

The news release from the Royal Academy of Sciences states: “Beginning in the 1960s, Eugene Fama and several collaborators demonstrated that stock prices are extremely difficult to predict in the short run, and that new information is very quickly incorporated into prices. These findings not only had a profound impact on subsequent research but also changed market practice. The emergence of so-called index funds in stock markets all over the world is a prominent example.”

“Her career established, Elspeth is starting to save a little money and wants help devising a financial plan. Most of all, she wants a home of her own. ‘The biggest question is when can or should I go from renting to buying, particularly in Vancouver’s real estate market,’ Elspeth writes in an e-mail. She is 26, single and earning $68,000 a year. To pay for the condo she envisages – a small one-bedroom in the city’s core – she could draw on her savings, including borrowing from her registered retirement savings plan, and perhaps even tap her parents for a loan. Elspeth is careful with money and a good saver…For someone her age, she takes a long view. She wants to know how much she should be saving for retirement, and she wants to build a rainy day fund to help her parents and grandparents with medical expenses if necessary. ‘I’d like my savings to grow but would also like to leave enough liquid for one-off expenses that may come up, such as furniture and a laptop upgrade in the next year or two, and vacation expenses,’ Elspeth writes. We asked Keith Copping, a fee-only financial planner with Macdonald Shymko & Co. Ltd. in Vancouver, to look at Elspeth’s situation.” Click here to read the rest of the article

“Why are the best-tasting foods—cake, pizza, beer—always the worst for your waistline? Meanwhile, dreary stuff like broccoli, wheat germ and anything labelled omega-3 is ridiculously healthy for you. The good news is you can have your cake and eat it too…Finding the right balance is also important in your portfolio. You’ve got to find the appropriate mix of exciting stocks and boring fixed income (bonds and GICs). Equities can grow your portfolio more rapidly, but they also carry the risk of big losses. Bonds are more stable, but don’t have the same potential for a big payoff. ‘Finding the right balance is a somewhat personal decision,’ notes fee-only planner Ian Black of Macdonald, Shymko and Company in Vancouver. Part of it comes down to how well you can handle volatility, but it’s also important to figure out how much money you want in retirement, Black says.” Click here to read the rest of the article

“When Marguerite quit her public service job in 2009 to get an MBA, her goal was clear. At 47, she was embarking on a new career in a field she felt would be more satisfying than her previous work. Her salary, together with her public service pension, would form the groundwork of her longer term financial plan, enabling her, she hoped, to retire at age 60 with after-tax income of $50,000 a year. That was then. Now, at 51, Marguerite finds herself working on a part-time contract earning a little more than $30,000 a year, living with and caring for her mother, who is 87 and ailing. Her mother’s savings are enough to pay for her daytime caregivers for a few more years… Her question: ‘Can I reach my retirement goal if I continue to work part-time to age 60 at a similar salary, which would allow me the flexibility I need to care for my mother?’ Marguerite asks in an e-mail. If not, how much would she have to earn? We asked Ngoc Day, a fee-only financial planner at Macdonald, Shymko & Co. Ltd. in Vancouver, to look at Marguerite’s situation.” Click here to read the rest of the article